As part of recommendations to help improve Ghana‘s domestic mobilization to support economic growth, the World Bank has expressed concern for the numerous tax exemptions the country offers hence calling for a reconsideration of the exemption for cocoa farmers.
The World Bank says the numerous tax exemptions are draining the country a significant amount of revenue which can propel the developmental aims of the country.
The Bretton Woods institution names exemptions in Value Added Tax (VAT). Personal Income Tax (PIT) and import duties as major sources costing the country billions in revenues.
This was contained in a recently published report of the World Bank dubbed “Ghana Public Finance Review“which sought to identify weaknesses in Ghana’s fiscal administration and proffer actionable solutions.
The report was launched on Wednesday, February 12, 2025, under the theme “Building the Foundations for a Resilient and Equitable Fiscal Policy “. It also aimed to provide an in-depth analysis of the efficiency, equity, and impact of public revenue and expenditure, focusing on selected critical sectors.
Outdooring the report through a presentation to stakeholders, the World Bank revealed that exemptions from VAT, PIT, and import duties alone are costing the country a significant revenue loss equivalent to 3.9% of GDP.
The personal income tax exemptions given to cocoa farmers are costing the state a revenue worth 0.42% of GDP while exemptions for pensions/social security contributions also result in a revenue loss equivalent to 0.37% of GDP.
“For PIT, exemption for cocoa farmers had the deepest impact on revenue (0.42 percent of GDP), followed by deductions for pension/social security contributions (0.37 percent of GDP)”, the report cited SKB Journal read.
Given the revenue gap created by the exemptions for cocoa farmers, the World Bank believes that it is about time the country relooks at this exemption. The Bank admits that taking away the PIT exemption for cocoa farmers might cause problems if done alone. However, it says if the government removes it, it can introduce other programs to help those who would be most affected.
“Eliminating the PIT exemption for cocoa farmers could be disruptive in isolation but would enable the introduction of more targeted instruments to mitigate welfare losses among key beneficiaries,” the report indicated.
On the back of this recommendation of the World Bank is a contrasting opinion from a tax expert, Partner and Director of Tax Services at PricewaterhouseCoopers, Abeku Gyan-Quansah believes such a proposal is unjustifiable and unfair.
The tax expert at PwC explains that the government is already “shortchanging” cocoa farmers with the current system for buying cocoa.
He pointed out that although the global market price for cocoa is significantly higher, Ghanaian farmers are restricted by law from selling their produce directly on the open market. Instead, they must sell to a state body at a price often far lower and sometimes half or even less than half of what their cocoa could fetch internationally.
In his view, the government is already raking in billions of revenues from the sweat of cocoa farmers through the buying arrangement, and hence any policy to tax them in addition will be bad and unjust.
“The current architecture that we have in Ghana, I will not, based on this current architecture, support a tax or an income tax on our own farms,” he contended.
With Ghana being the second-largest cocoa producer in the world, any tax policy affecting farmers is likely to have significant economic and social implications.
Other experts maintain that although there is a need for the country to raise revenue through taxes, these taxes should not be at the expense of the livelihoods of cocoa farmers.
